Question

1. Suppose the following table shows the supply schedules for delivery trucks in Thailand, Vietnam and Laos:

Price per truck	Quantity Supplied in Thailand (thousands)	Quantity Supplied in Vietnam (thousands)	Quantity Supplied in Laos (thousands)
$2,000	150	100	25
$3,000	230	120	50
$4,000	300	140	70
$5,000	450	160	80

Suppose the United Nations establishes the Southeast Asia Economic Union (SAEU) that combines the markets of the three countries. Derive the market supply for the SAEU.

2. List the 3 reasons that price and quantity demanded are inversely related, all else equal (i.e., the Law of Demand). Give an example of each with an explanation of how your example helps explain the Law of Demand.

3. When lettuce prices doubled, from about $1.50 per head to about $3.00, the reaction of one consumer was quoted in a newspaper article: “I will not buy [lettuce] when it’s $3 per head,” she said, adding that other green vegetables can fill in for lettuce. “If bread were $5 per loaf we’d still have to buy it. But lettuce is not that important in our family.” For this consumer’s household, which product has the higher price elasticity of demand: bread or lettuce? Explain.

4. A news article from April 2015 reported that gasoline prices were expected to decline by32 percent during the summer of 2015 while “US drivers are expected to consume slightly more gasoline, a 1.6 percent increase, during the summer.” Calculate the price elasticity of demand for gasoline from this information. Is the demand for gasoline elastic or inelastic? Explain. [source: Damian J. Troise, “Summer Gas Prices Expected to Be 32 Percent Lower This Year,” Associated Press, April 7, 2015.]

5. In early 2012, Starbucks increased the prices for some of its tasty beverages in parts of northeastern and southern US states. Some people thought the price increase would hurt Starbucks, but most business analysts agreed that the price increase would not hurt decrease the coffee company’s revenues. What would have to be true for the analysts to be correct? Explain.

Answer 1